Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CLS Holdings PLC (STU:838, Financial) experienced strong leasing momentum, with new leases signed at 5.9% above Estimated Rental Values (ERVs).
- Net rental income increased by 5.9%, driven by higher income from indexation and strong performance from hotel and student operations.
- The company successfully completed property sales worth GBP61 million in H1, with a further GBP160 million planned for H2.
- CLS Holdings PLC maintained a strong balance sheet with over 80% of debt fixed or capped and an interest cost of 3.81%.
- The company is making progress on its Net Zero Carbon pathway, with a 4.3% decrease in like-for-like energy consumption.
Negative Points
- EPRA EPS decreased by 7.7% due to increasing financing costs, despite growth in net rents.
- Valuations fell by 4.1% in local currency, driven by yield expansion, with declines across the UK, Germany, and France.
- The total vacancy rate increased to 13.2% due to completed developments, despite a reduction in underlying vacancy.
- EPRA NTA was down 10.1%, impacted by valuation declines and a strengthening of sterling against the euro.
- The company faces higher financing costs, with interest costs increasing by 58 basis points compared to last year.
Q & A Highlights
Q: Could you provide details on the current asking price per square foot for the remaining space at Artesian and any insights on market rent and demand trends?
A: The average rent for the building is GBP59 per square foot, with variations depending on the floor. The area has seen significant changes with limited new supply, leading to increased interest. We expect to achieve ERVs at this rate, and demand is picking up as we approach year-end. β Jonas Fredrik Widlund, CEO
Q: Regarding Citadel Place, what are the options for realizing value, and is it intended for retention or sale?
A: We are keeping all options open, with the first priority being to secure planning permission. Given the project's size, partnering with another entity is likely. Options include exiting the site, partial sale, or a joint venture, with the latter being attractive for portfolio diversification. β Jonas Fredrik Widlund, CEO
Q: Are you seeing a pickup in investment volumes, and what are your agents saying about disposals?
A: Disposals are progressing well, with more sales in the first half of this year compared to last year, achieving book value. We aim to complete GBP220 million in sales this year, with Spring Mews Student being a significant sale. We are disciplined sellers, waiting for the right prices. β Andrew Kirkman, CFO
Q: With earnings dipping this year, do you expect admin costs to have peaked with wage inflation?
A: We are managing inflation impacts on admin costs. We anticipate driving rental growth while financing costs seem to have peaked, aided by rate cuts from the Bank of England and ECB. We expect a positive outlook on both rental and financing lines. β Andrew Kirkman, CFO
Q: Beyond the 45% LTV target for year-end, where do you see LTV settling over the longer term?
A: Our target LTV range is 35% to 45%. LTV has increased due to valuation declines, but net debt has reduced. As valuations stabilize, we will reassess the need for further actions. Sales will help bring LTV back into range by year-end. β Andrew Kirkman, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
